• Thursday, January 23, 2020

Moody’s hints at downgrading Pakistan’s external credit rating

Discussion in 'Pakistan Economy' started by SunilM, Dec 14, 2018.

  1. SunilM

    SunilM BANNED

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    Moody’s hints at downgrading Pakistan’s external credit rating

    KARACHI:

    Moody’s – the global credit rating agency – has hinted at the possibility of downgrading Pakistan’s external credit rating ahead of the country’s plan to float Eurobond aimed at raising $3 billion from world markets.


    The debt level of Pakistan – whose foreign currency reserves have dropped to the critical level of around one and a half month of import cover – is expected to swell with weak repayment capacity. This grave situation may convince the agency to downgrade the rating.

    At present, Moody’s maintains ‘B3 negative’ credit rating for Pakistan.

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    “The negative outlook is primarily driven by heightened external vulnerability risk. A further deterioration in Pakistan’s external position, including a more pronounced erosion of foreign reserve buffers, which would threaten the government’s external repayment capacity and heighten liquidity risks further, would likely result in a downgrade of the rating,” Moody’s said in its annual credit analysis titled ‘Government of Pakistan – B3 Negative’ on Thursday.

    “Expectations that government debt would continue to rise markedly, with a related deterioration in debt affordability from already weak levels, could also lead to a rating downgrade,” it said.

    The global rating agency has issued the warning for the possible rating downgrade at a time when the county is planning to float Eurobond and Sukuk worth $3 billion in the international market to increase its capacity of making international payments.

    The country remains in talks with the International Monetary Fund (IMF) to acquire a bailout of $8 billion during January-March 2019. Besides, it is in contact with friendly countries and strategic partners to get financial assistance worth $11-12 billion in following months.

    “At around 72% of GDP as of end-fiscal year 2018, the government’s debt stock… burden (is) to rise further and peak at around 76% of GDP in fiscal 2020,” it said.

    Economic growth forecast

    Moody’s expects real GDP growth in Pakistan to slow to 4.3-4.7% in fiscal year 2019 (ending June 2019) and fiscal 2020 from 5.8% in FY18 in part due to policy measures taken to address the external imbalance.

    “While we expect Pakistan’s growth to slow over the next two years, in part because of policy measures to address the external imbalance, economic activity will remain relatively robust in line with the country’s historical growth performance. Further institutional reforms planned by the new government, if effectively implemented, will also bolster institutional strength, which has increased in recent years with greater central bank autonomy and monetary policy effectiveness,” it said. “The longer-term economic prospects remain robust, in part because of improvements in power supply, infrastructure and national security that have raised the country’s growth prospects and hence business confidence.

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    “The negative outlook signals that a rating upgrade is unlikely,” it said. “The outlook is likely to be changed to stable if external vulnerability risks decreased materially and durably, including through policy adjustments that strengthen the external payments position. A resumption of fiscal consolidation pointing to a significant reduction in the debt burden would also be credit positive.

    Balancing credit challenges is the country’s strong growth potential, a relatively large but low-income economy and a stable banking sector. In particular, infrastructure investments and the significant increase in power supply, including through projects under the China-Pakistan Economic Corridor (CPEC), will address some of Pakistan’s long-term economic constraints and strengthen its growth potential.

    https://tribune.com.pk/story/1866378/2-moodys-hints-downgrading-pakistans-external-credit-rating/



     
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  2. Skull and Bones

    Skull and Bones ELITE MEMBER

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    This is very sad and very bad, it was already junk rating before. How low can it go? :(
     
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  3. Nilgiri

    Nilgiri ELITE MEMBER

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    Tomato farmer I am sure will know, lets ask:

    @BHarwana
     
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  4. Abdussamad

    Abdussamad BANNED

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    junk to even more junk. that's why we have to borrow at 5.5% from the diaspora. even these people who have an emotional connection to pakistan can only be persuaded to lend us money at exorbitant rates.
     
  5. Imran Khan

    Imran Khan PDF VETERAN

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    asad umer beta kuch kar
     
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  6. Cherokee

    Cherokee SENIOR MEMBER

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    Will make Borrowing more expensive if that happens.
     
  7. Salza

    Salza SENIOR MEMBER

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    So ? Everybody knows 2018 and 2019 will be hard years for Pakistani economy but things will change from 2020 onwards with all the foreign money coming next year and new govt policies, start taking shape. Major action is being taken against corruption and money laundering and its reflection will be there in an year time. Though still there are gaps, which needs revolutionary fixing like tax collection ...current govt is addressing the issue and may bring reforms for FBR but not much success so far.
     
  8. Riz

    Riz SENIOR MEMBER

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    Kuch farak nhi parta... Bikharion ki rating ha yaar... Kuch thori kam ho ya kuch zeyada ho jay... Kuch dimag bhi istamal kar lia karo... :crazy:
     
  9. Darwin

    Darwin BANNED

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    Just for info -

    Moody's ratings:
    • Aaa: Smallest degree of risk
    • Aa (Aa1, Aa2, Aa3): Very low credit risk
    • A (A1, A2, A3): Low credit risk
    • Baa1, Baa2, Baa3: Moderate credit risk
    • Ba1, Ba2, Ba3: Questionable credit quality
    • B1, B2, B3: High credit risk
    • Caa1, Caa2, Caa3: Very high credit risk
    Pakistan is at B3 with negative outlook.
     
  10. enquencher

    enquencher FULL MEMBER

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    Jus see his post if dares to post here.he will try conviencing gullible lot abt how it was masterstroke from ik and assd in tricking imf trump the eu n falana and dimka. N how the economy will take off after that.
    I really like this clown.

    Long way to go..3 more steps..caa1..caa2...caa3..n boom(a new category will be formed)
     
  11. Darwin

    Darwin BANNED

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    I don't like your assumption that their are 3 steps. A sovereign rating can drop directly from B3 to C3 in one step. These ratings are probably half yearly in nature not dynamic.
     
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  12. Umair Nawaz

    Umair Nawaz ELITE MEMBER

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    its temporary, because of government's efforts to balance external debt...by 2020 as this report says Pakistan will again grow at 5.8% that was this year's fiscal growth rate.
     
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  13. ziaulislam

    ziaulislam ELITE MEMBER

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    Need devaluation productivity investment and exports

    But problem is PHD class Pakistani dont understand this (how money has worth) while 5th grade students understand this elsewhere
     
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  14. Mage

    Mage SENIOR MEMBER

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    kargalar bile gülecek.

    Even crows will laugh. 70% of Pak economy is undocumented. While it keeps its 8x bigger neighbour at bay. Now Pakistan have a mars e momin leader. It will only rise. In Karachi there are 200k armed to teeth bodyguards protecting huge amount of wealth. It only shows how large Pakistani economy is. While Pakistan's 8x larger enemy will have to wait 1000 more years to take revenge for the Muslim rule.
     
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  15. punit

    punit BANNED

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    So 70% undoumented/ black market economy is good thing for paksitan.!! @SunilM